Iraq has recently enacted a new law on pension and social security, aiming to enhance working conditions for employees in the private sector. This legislation grants them the right to retire upon completion of their service, similar to the provisions existing in the public sector. The public sector has been grappling with issues of excessive workforce and an escalating wage expenditure.
Following the downfall of Saddam Hussein’s regime in 2003, successive Iraqi administrations have embraced public sector recruitment as a key element in the election campaigns of various political parties. This approach has led to a significant surge in the number of public sector workers, rising from 850,000 in 2003 to approximately 4.5 million. Consequently, the annual wage expenditure has reached nearly 46 trillion Iraqi dinars (equivalent to $31 billion).
Law No. 39 of 1971 – Outdated and Insufficient Provisions:
The Pension and Social Security Law No. 39 of 1971 currently in force is subject to several criticisms; for example, the Independent Human Rights Commission of Iraq considers that it does not keep pace with the economic and social developments that have accompanied the lives of workers in Iraq. Pensions for workers in the private, cooperative and mixed sectors are very low and do not meet the minimum requirements for a decent life, making it necessary to adopt a new law on pensions and social security as soon as possible.
The current law is no longer in line with national legislation and international labour standards. It does not meet the requirements imposed by developments in the various labour sectors. It also has difficulty keeping up with the country’s demographic development, which has created problems in financing the system and led to insufficient benefits for many workers. In addition, the current law does not cover all workers, as it only applies to employees and does not take into account the self-employed or temporary workers. This means that many workers do not have access to social security benefits, which can leave them vulnerable in the event of accident or illness.
The current pension system in Iraq is based on a defined benefit system, which is calculated according to length of service and earnings. This has led to a situation where benefits are disproportionate to the contributions paid, resulting in significant financial imbalances in the pension system.
The social security system is plagued by cumbersome bureaucracy and rampant corruption, resulting in significant delays in claim processing and irregular disbursement of benefits. Beneficiaries often endure lengthy waits, spanning months or even years, before receiving their entitled benefits. This situation creates severe financial hardships for workers and their families. Furthermore, private sector companies frequently evade enrolling their employees in the social security system, while workers, facing wage depreciation, struggle to meet the required contributions for enrolment. Consequently, it is unsurprising that workers reaching retirement age or facing disabilities or illnesses find themselves devoid of any guarantees or rights.
According to data from the Ministry of Planning, there were about 180,528 workers subscribed to social security in 2020, working in 46,239 private and cooperative projects. According to another source, there are currently about 284,000 insured workers in Iraq, of whom only 18,000 are retired and receiving a pension, while 140,000 workers are still paying contributions. This figure is lower than the official estimates of the Private Sector Workers’ Pension Fund, compared to the total number of the workforce (about 6.5 million people) excluding public sector employees (about 3.5 million).
The New Law between Contributions and Shortcomings:
Since 2015, several efforts have been made to adopt a new social security law to replace the old one. Although the government’s main objective is to reduce state support for the Workers’ Pension Fund and the attractiveness of the public sector to young people, the Ministry of Labour states that the new law seeks first and foremost to improve protection for all categories of workers.
The Ministry of Industry and Mineral Resources says that the new law raises the minimum pension threshold to 350,000 Iraqi dinars (about $250). The law also includes the self-employed; anyone who wishes to register for social security can do so by paying the necessary contributions. The new law also provides for the right to a retirement pension for a man with 30 years of guaranteed service at the age of 50 and for a woman with 25 years of guaranteed service at the age of 50. In addition, a woman with three children and a guaranteed service of 15 years is also eligible for retirement at any age. The retirement age is set at 63 for men with a guaranteed service of 15 years and 58 for women. The employer, like the state, pays contributions not exceeding 16% of the expenses.
This contribution rate is strongly denounced by the Iraqi Federation of Industries, which points out that the state pays only 10% of the expenses and that the private pensioner will be paid much less than the public pensioner. According to the spokesperson of the employers’ organisation, a private pensioner will receive 250,000 while a public pensioner will receive 750,000 for the same salary. The Federation calls on the State to participate in the contributions in favour of private sector workers, stressing that the text in its current version risks having a strong impact on investments in the country. The employers are demanding that their contributions be limited to 9% of the employee’s salary.
Trade unions denounce the lack of constructive dialogue on this law that is decisive for the future of all workers in the country. The General Federation of Trade Unions of Iraq (GFTU) has pointed out several shortcomings in the text which “represents an attempt to remove the State from its obligations, as stipulated in Article 30 of the current Iraqi Constitution”. In particular, the Federation denounces the postponement of the legal retirement age as well as the increase in the contributions to be paid by employees.
The Iraqi trade unions organised a conference at the end of which they listed the points of the new text that arouse their reservations. In a statement dating to 5 May, the Conference of Iraqi Trade Unions and Labour Federations called on MPs and the relevant ministries to take into consideration the following points so that the new law is fair and equitable for all workers:
- To maintain the rights and benefits granted to workers by the Law on Retirement and Social Security for Workers No. 39 of 1971.
- To grant those who retired before and after 2007 all the rights to which they are entitled from the date of their retirement.
- Not to increase workers’ contribution rates (from 5% to 7%).
- Not to increase the legal retirement age.
- Maintain the cost-of-living bonus at 1% of the pension for each year of service.
- Not to deprive pensioners of direct and indirect general social services as provided for by the current law.
- To strengthen the role of the trade unions by granting them the right to fair representation on the Administrative Council of the Social Security Fund and on the various committees that will be formed in accordance with the new law.
- To establish a permanent participation of the State Fund in the resources of the Social Security Fund in accordance with the provisions of the 2005 Constitution.
- Creating a separate branch to ensure maternity rights and the need to harmonize the rules set out in the law in this regard with the rules set out in Article 87 of Labour Law No. 37 for the year 2015 concerning the rights of working women.
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